Some investor claims are easy to see, such as when money is simply missing from an account or a financial advisor has been arrested for securities fraud. The financial advisor did not commit fraud, but he did make mistakes that caused investment losses. Here are the three things we see in most of the investor claims we file against financial advisors for malpractice or negligence. Another breach of duty can occur when a financial advisor makes unsuitable investment recommendations. If the advisor recommends investments that do not align with the client’s objectives or fail to take into account their risk tolerance, it can be deemed a breach of their duty to provide suitable advice.
Ethical Standards and Violations
Another term for lack of diversification is excessive concentration in an investment. You put your trust in your financial advisor to act in your best interests. If you are reading this, then the odds are that they have failed can i sue my financial advisor you, and your trust was misplaced. But before it gets to all that, look for someone with whom you can build a strong advisor-client relationship—one built on trust. This is your best protection against such disputes happening in the first place. Even if you and a potential advisor aren’t working with crypto assets, you still need to carefully vet their pitches.
- „Clients shouldn’t feel anxiety or guilt about moving on from an advisor that isn’t helping them achieve their goals,“ said David Flores Wilson, a New York City certified financial planner.
- Your fundamental rights as an investor are outlined by regulators that include FINRA and the North American Securities Administrators Association (NASAA).
- Financial advisors may also breach their duty by engaging in unauthorized trading.
- And, once an arbitration award decision is reached, it is final, with minimal options for appeal.
- It is a private process where an impartial arbitrator hears the evidence and makes a binding decision, usually within months.
- Suing a large firm is certainly difficult, but it is not impossible and it may be worth trying.
When Can I Sue My Financial Advisor for Bad Advice?
In cases of significant loss, you may seek legal advice to explore your options for compensation. While these indicators can help you identify potential misconduct, it is important to note that they do not definitively prove wrongdoing. If you observe any of these signs, consider seeking a second opinion from another financial professional or consult with a lawyer specializing in financial misconduct cases.
How to Sue Your Financial Advisor or Stockbroker Over Investment Losses
The arbitrators listen to witnesses testify, review exhibits, and determine credibility when ruling on a case. Like jurors in a court of law, the arbitrators find the facts according to the testimony and then apply them to the law. These rules apply to securities traded on the national exchanges like the New York Stock Exchange and NASDAQ, over-the-counter (OTC) securities, and other investments.
Time Limitations for Filing a Lawsuit
- If your arbitration claim is successful, you may be issued a FINRA arbitration award that includes financial compensation for the full value of your losses.
- One of the key roles of a financial advisor is to assess a client’s financial situation and develop a customized plan to achieve their goals.
- They must not engage in any activities or relationships that could compromise their ability to prioritize your needs.
- That process is customarily overseen by the Financial Industry Regulatory Authority.
- If the facts about an investment opportunity prove significantly different from what your advisor told you, the advisor might have committed misrepresentation.
The more level the playing field in terms of resources, the better your chances. Determining liability, the initial aspect, encompasses more than mere financial loss. To substantiate your claim, you must demonstrate that your financial representative committed an act of negligence or fraud, and that their misconduct directly resulted in your monetary setback.
FINRA operates an arbitration forum for disputes between investors and the financial firms FINRA regulates. If your financial advisor has caused investment losses, you may want to sue your financial advisor. For better or for worse, you may instead be forced out of court and into a FINRA arbitration. This post explains why securities litigation frequently ends up in FINRA arbitration, and what you can expect from the FINRA arbitration process. When it comes to managing our finances, many of us rely on the expertise and guidance of financial advisors. These professionals are entrusted with the responsibility of helping us make informed decisions about our investments, retirement plans, and overall financial well-being.
Myths About Uber & Lyft Accident Lawsuits That Riders Get Wrong
As a final positive reflection of Robert, his staff is highly skilled and always welcoming.I would most certainly recommend his services to family and friends without hesitation. FINRA will enforce the award if you win in arbitration, just like a court will enforce a judgment. While every case is different, there are a number of factors that will influence whether or not you have a successful lawsuit. The odds are stacked against you, especially if you are dealing with a large firm.
These clauses significantly shape how claims are handled, making it imperative to understand their implications on your ability to sue. Trusting a financial advisor or broker with your economic well-being is a significant decision, and most professionals in this field handle their responsibilities with diligence and integrity. However, there are instances when they fail in their obligations, leading to serious financial consequences for their clients through negligence or deliberate misconduct.
A jury made of people from the community might sympathize with an individual investor over an all-powerful investment brokerage. However, any lawyer who has tried cases before will tell you it is incredibly difficult to predict what a jury might do. Their designation can limit products and services they are allowed to sell to clients who are saving for retirement. Either way, the unfortunate reality is that litigation is an investment in itself, with its own risks and rewards.
Bear in mind, the mere occurrence of a financial loss is insufficient to establish wrongdoing on their part. This article will cover whether or not you can sue your financial advisor, the process of doing so, and what to expect. One major area where FINRA’s audits have found problems is advisors working with crypto assets. When you entrust your money to a financial professional, they have specific duties and obligations to uphold.
FINRA also provides an arbitration forum for resolving disputes between investors and financial advisors. The Securities and Exchange Commission (SEC), a federal government agency, enforces securities laws, mandates disclosure from public companies and oversees key industry participants. It prosecutes civil enforcement actions against violators of securities laws, enhancing transparency and accountability in the marketplace. While the FINRA arbitration process is somewhat similar to traditional litigation, there are some important differences that only an experienced arbitration lawyer can handle. If you lost money on investments based on a broker’s or financial advisor’s advice, you could have the right to sue the brokerage over losses.
The way that a broker can steal your money is known as „conversion of funds,“ which is illegal under FINRA Rule 2150. This is a misappropriation of money in which they use several strategies to move money from your account to their account. If you are not dealing with a big firm, there is a far more level playing field and you have a much better chance.
All these factors need to be weighed up in advance before a sensible decision is made. Further, there are far fewer grounds for appealing an arbitration decision. That helps limit the length of time that the battle with your brokerage can drag on.
Also known as the fiduciary rule, the rule’s purpose is to protect investors from conflicts of interest when receiving investment advice that the investor uses for retirement savings. A financial damages claim is not for the fainthearted, but it may be worth it in the end. Make sure you think things through very carefully before the cost „clock“ starts ticking, and bear in mind that you will probably not get objective advice from a lawyer who is keen to sell (or mis-sell) litigation. Suing a large firm is certainly difficult, but it is not impossible and it may be worth trying.
You might not have a right to file for arbitration if the statute of limitations ran out, even if you remain eligible under FINRA’s rules. In most cases, unfortunately, you have no choice between arbitration and court. Most large brokerage firms put an “arbitration selection clause” in their contracts. It is likely buried among several pages of legalese in the contract you signed to open an account.